ECB’s Centeno: ‘Inflation Above 2% Is Never Temporary Enough’

10 February 2022

By David Barwick – FRANKFURT (Econostream) – Inflation above 2% cannot be temporary enough, European Central Bank Governing Council member Mario Centeno said Thursday.

In an interview with Portuguese business daily Jornal de Negócios, Centeno, who heads Banco de Portugal, said, ‘There is one thing that is not good: inflation above 2% is never temporary enough. We always get very anxious when these indicators exceed our targets, but we were already prepared for that. The change we made with the ECB's revised strategy envisaged that, temporarily, inflation could be above 2%.’

The Portuguese economy has space ‘to negotiate wages and not have those second-round effects’, he said. ‘They are not yet visible.’ In this context, he pointed to a large Portuguese company whose pay scales were recently revised ‘well below the values that are being talked about in Europe.’

‘In Italy there is also no evidence that this is happening’, he said of second-round effects on wages.

‘The US is a completely different situation and the UK imposed a Brexit on itself which had a very negative impact on the labour market and removed hundreds of thousands of workers from the country’, he said. ‘And this creates wage and price pressures that we don't have in the EU. We don't need to import problems that others have that, for us, simply don't apply.’

Centeno rejected the word ‘unconcerned’ to characterise his view of how Portuguese fiscal affairs would deal with tighter monetary policy, saying that ‘we need to look at the whole problem and understand that the best way for the country to continue to prepare for this change of cycle in monetary policy is the reduction of indebtedness, which is in fact happening, and which is projected for the coming years as necessary and achievable and desirable from the point of view of the State's budgetary and financial policy.’

‘Therefore, if we manage to achieve these goals, the word unconcerned may gain some life because in fact we are transferring it not from the result itself but to the actions that must be adopted’, he continued. ‘In other words, if we do what we have to do, we can face this situation with some reinforced confidence, certainly more than what we experienced five, six years ago.’